4. How has the emergence of a “knowledge-based economy” influenced performance measurement? How does the development and continued use of the balanced scorecard address the problems faced by knowledge-based firms such as HCS?
The emergence of the knowledge-based economy has altered the perceptions of the management with regard to human capital. Human resources are responsible for value creation in all aspects of the company in question. Besides, it contributes to the development of the corporate strategy, and this makes it appropriate for these resources to be directed towards the maximization of the overall performance of the company in question. Markedly, this requires close monitoring and proper human resource management. In this case, valuable knowledge and key employees are retained (Sokolov & Zavyalova, 2018, p. 4, par.2). Thus, organization strategy and performance are taken into consideration.
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The effectiveness of a company is based on the application of the best human resource planning and management. Therefore, to achieve the set goals and objectives, there is a need to embark in the measuring of performance with regards to the set targets to realize the differences. Once the differences are established, then the right mechanisms are put in place to enhance the achievement of the targets. These elements cannot be attained without the measurement of the performance. The measurement processes constitute of traditional and modern mechanisms. The knowledge-based economy advocates for both mechanisms (Wu, 2005, p. 267, par. 2). Therefore, their blending enhances the synergistic effect, which enhances the overall productivity of the organization in question.
The major goal of companies is to enhance the overall performance to fit the current changes in the respective sectors. The knowledge-based economy depicts that working at a faster base is not an end in itself as this cannot enhance the overall performance by itself. There is a need to achieve more with the limited resources in the organization. The performance of a corporation is based on the level of customer loyalty, the number of measures directed towards performance, and the overall employee satisfaction. In the end, the organization develops customer capital, which enhances performance (Wu, 2005, p. 279, par. 1). Therefore, it is necessary to measure and recognize the contributions of these employees to motivate them to achieve more in their endeavours. Besides, they can be motivated through positive reinforcements that are arrived at through the performance measurement strategy.
The development and application of the scorecard is a solution to the challenges encountered by knowledge-based organizations like HCS. The balanced scorecard is responsible for the implementation of strategy and increase in performance of the knowledge-based organizations. It does this through the minimization of the integration of process and innovation capital to achieve the organizational goals and objectives (Wu, 2005, p. 275, par. 1). Ultimately, the inclusion of the balanced scorecard is the basis of a more integrated analysis of the corporate performance which results in the development of a holistic vision that encompasses the definition and integration of proper communication to the different stakeholders in the organization.
5. HCS’ primary performance measurement issue is management’s inability to assess its efforts to sustain its primary strategic resource: human capital. How do unrecorded assets such as HCS’ intellectual capital affect management decision processes?
The HCS unrecorded assets directly impact on the management decision making process in different ways. The fact that they are not captured in the system means that they can be forgotten easily as the management concentrates on the recorded aspects. Besides, their impact on the development and expansion of the organization are overlooked, and as such, their importance is not taken into consideration. In the quest to give them the preference they deserve, they should be recorded and accounted for in different aspects. Also, through their recognition, the management decisions are centered on improving them as well as the overall performance of the organization. They are responsible for the conversion of non-financial aspects into financial ones (Wu, 2005, p. 269, par. 2). Even though they are not recognized in the traditional management system, unrecorded assets are crucial in the decision making process as they help the organization in facing the performance measurement challenge.
Additionally, in the present environment, competitive advantage is the basis of organizational performance. Unrecorded assets like intellectual capital enhance the competitive advantage of a company (Wu, 2005, p. 267, par. 2). Markedly, this directly affects the management decision processes as they are geared towards maintaining or even increasing the level of its competitiveness of an organization. Furthermore, the intellectual capital makes the management to consider the decision of research and development in the company in question. The decision is aimed at improving the operations and the services in the organization. Intellectual capital directly contributes to the company’s performance (Gogan et al., 2016, p. 195, par. 2). It encompasses the learning process beside the company’s growth perspective, and hence, this creates opportunities to improve the services and the processes of the company to enhance continuous performance.
Even though they are not recorded, assets like intellectual capital play a major role in the decision making process with regards to the company. Without these skills, the management of the company may turn out to be challenging, and in the end, the company will fail due to operational problems. The company strategies are connected to intellectual capital. In view of this, these assets should be accounted for as they are the pillars in the management decision processes. However, it is not easy to establish the value of these intangible assets, and this explains why they are not accounted for. The balanced scorecard can be utilized in the valuation of these assets. The possibility of the measurement is attributed to its connection with the balanced scorecard as it takes part in the planning of the future incorporation and development of the intangible assets (Wu, 2005, p. 281, par. 4). Accordingly, they are the basis of the decision processes in knowledge-based organizations.
References
Wu, A. (2005). The integration between the balanced scorecard and intellectual capital. Journal of Intellectual Capital , 6 (2), 267-284. file:///C:/Users/org/AppData/Local/Temp/Temp2_2020-04-21%2018_03_38.238860_239982%20(1).zip/388094pdf%20(1).pdf doi:10.1108/14691930510592843
Gogan, L. M., Artene, A., Sarca, I., & Draghici, A. (2016). The impact of intellectual capital on organizational performance. Procedia-social and behavioral sciences , 221 (0), 194-202. https://core.ac.uk/download/pdf/82431605.pdf
Sokolov, D., & Zavyalova, E. (2018). Knowledge management strategies, HRM practices, and intellectual capital in knowledge-intensive firms. https://dspace.spbu.ru/bitstream/11701/15119/1/Sokolov_Zavyalova_WP_3-2018.pdf
